One on One with Aubrey McClendon, CEO of Chesapeake Energy
Wednesday, July 30, 2008
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SUSIE GHARIB: A new study released today by the American Clean Skies Foundation says the U.S. has far more reserves of natural gas than previously estimated and this finding could be a potential remedy to the energy crisis. Joining us now to talk more about that study and the outlook for natural gas, Aubrey McClendon, chairman of the foundation and CEO of Chesapeake Energy, one of the nation's largest natural gas producers. Mr. McClendon, welcome to NIGHTLY BUSINESS REPORT.
AUBREY MCCLENDON, CEO, CHESAPEAKE ENERGY: Thanks, great to be with you tonight.
GHARIB: It's encouraging to hear about these plentiful reserves, but what do you think needs to be done to give incentives to industry and to businesses to find new ways to use natural gas as an energy source?
McCLENDON: Well, there's a bill introduced last week by Representatives Emmanuel of Illinois and Bourne of Oklahoma and it's called the Nat Gas Act. And what it does is creates three types of incentives. First of all, incentives for service station owners to install compressed natural gas pumps, CNG pumps, creates incentives for manufacturers to make CNG vehicles and finally it gives incentives to consumers to buy cars that run on CNG and to buy home refueling devices that run off their home natural gas. So why are these incentives important? Well, it's because it will get people using a product that is in abundance in the United States - - 98 percent of our natural gas comes from the United States and Canada. It's cheaper by half than oil and it's about two-thirds cleaner. So what the concern has been is is there enough natural gas to start to move our transportation network away from oil, imported oil and move it towards domestic natural gas and we think our study today is a big first step in trying to change the perception about natural gas in this country.
GHARIB: I know that your company has been working very hard to drill and extract natural gas from the Haynesville (ph) shale -- I don't know what you call it, shale site in Louisiana. How confident are you that you will be able to extract natural gas from there in a plentiful supply?
McCLENDON: We're highly confident. First of all, we're the nation's number one producer of natural gas. We're the largest driller of new natural gas wells and we believe we know more about shale formations than anybody else in the industry for that matter perhaps in the world. And so when we six months ago discovered this field called the Haynesville in northwestern Louisiana, subsequent drilling leads us to believe that this is the fourth largest gas field in the world and probably the largest gas field in the United States by a big number. In fact, we think in one accumulation, we found enough gas to supply the whole United States with gas for another 10 years. And so, through the American Clean Skies Foundation, we hired a consulting firm to come in and take a look at what the data we're seeing and see if you arrive at the same conclusion. There will be more studies. There will be government studies. There will be a lot of industry studies that we think will corroborate what this study found.
GHARIB: But to what extent is your drilling activity going to be dependent on the price of natural gas? We have seen it drop from something like $14 down to $9 and some analysts are predicting $7 by next year. Is there a price level at which you're going to slow down your drilling activity?
McCLENDON: Well, the industry slows down whenever gas prices get below $8. Consumers slow down whenever gas prices get above $12 or 13. So I've been on record as saying that somewhere between $9 and $11 for (INAUDIBLE) BTU is a fair price for consumers, fair for producers and to give you some oil equivalency, it's the equivalent of $54-$66 so a real bargain from a BTU perspective if gas prices will settle in that range.
GHARIB: Mr. McClendon thank you so much for coming on our program. We really appreciate your time.
GHARIB: My guest tonight, Aubrey McClendon, CEO of Chesapeake Energy.
McCLENDON: I appreciate the opportunity, thank you.
